Understanding and Improving Your Organisation’s Default Future

David Trafford argues that individuals, families, organisations and countries all have default futures: the place they will end up if they continue on the same path and take no action. He discusses the forces that determine the default future of organisations and the role that leaders need to play in both understanding their organisation’s default future and taking action to create an improved future.

We all have a default future. It’s the place we’ll end up if we continue on the same path and take no action to change that future. If the default future is a desirable destination, then there’s no need to be concerned, just enjoy the journey. If the default future is unacceptable, then effort and action is required to create an improved future. Default futures are not restricted to individuals as families, communities, companies and countries all have default futures, even change programmes have a default future!

Understanding the default future for which we are accountable is one of the most important roles – and legacy – of leadership, as is deciding what actions to take to create an improved future.

In some respects there is nothing new in this thinking as the early work of the late Peter Drucker (the father of modern management thinking) argued that a strategy is essentially a plan for getting to a future state. So what’s different about the default future approach and how can it help us become better business leaders?

Understanding the default future engages people in a meaningful way

In a recent Formicio article I highlighted the fact that only a small proportion – typically 5% – of large-scale change programmes are successful. Assuming that the purpose of a change programme is to create an improved future, the question must be why is the success rate so low?

In my view, part of the reason is the lack of engagement by those who will either be impacted by the change or are instrumental to its success. Essentially there are three reasons for change: firstly to fix today’s problems, secondly to prevent future problems and thirdly to realise future opportunities. In the former case, engaging people in change is relatively straight forward as the reason for the change should be apparent. The last two cases are more difficult as they require people to look into the future and decide that an alternative – improved – future is better and is something they should strive for.

As people often find it difficult to define a default future – whether it is in the context of the organisation they lead, their place of work or in their personal life – a number of techniques are available to help them. The most effective include:

Defining the consequences of inaction

Understanding the consequences of inaction is a very powerful way of building a compelling case for change. Not to be confused with a ‘burning platform’, which describes what is wrong with today, it defines the likely future if no further action is taken. If leaders conclude that the default future is unacceptable they are more likely to become emotionally committed to doing something about it. To get an understanding of the consequences of inaction, simply ask the question:

“What will happen if no action is taken, other than what is currently planned?”

Draft a default future article

A second technique is to ask someone to imagine it is five or ten years in the future and get them to describe what they see. This approach was successfully applied in a global beer company (see below) to get the leadership engaged in developing a strategy to create an improved future for the company.

Getting the Executive Board to understand the consequences of inaction

The CFO of a global beer company had a gut feeling – supported by the numbers – that the default future of the business was not good. His challenge was to get his executive colleagues to agree and take action to create an improved future.

He achieved this by first getting support from his CEO for a strategy offsite where he could share his concerns and engage his colleagues in the challenge as he saw it. Prior to the offsite he wrote an article dated 10 years in the future where the newly appointed CEO was looking back at how the business had lost customers, brand reputation and the confidence of shareholders.

The three-page article was prepared to look like an edition of The Economist – with a suitably eye-catching cover – and left for colleagues to find and read as they checked into their rooms.

The result was instant and the serious work of defining an improved future began over dinner.

Listen to your instinct

People have an innate ability to ‘feel’ their default future. This gut feeling – whether it’s with respect to their personal lives, relationships with other people or the organisation where they work – should be listened to and not ignored. Often it’s the CEO’s gut feeling that triggers a strategy review long before the numbers indicate there is a potential problem with the business.

A powerful way of capturing these feelings is to ask the leadership, and those who work close to the customer, to describe how they feel about the future of the business. The richness of the resulting picture will determine whether there is a powerful case for change.

The second advantage of the default future approach is that it not only tells you what the future might be but, equally importantly, why. Understanding the forces that are influencing the direction of travel is important as it enables us to identify those we can control and those over which we have no influence.

This is somewhat different to contemporary thinking, which recommends we start by defining a vision that has audacious goals and ignore any constraints that might obstruct realising that vision. The importance of having a vision (improved future) is not in question; the point at issue is how best to envision an improved future that is realistic and relevant to your organisation.

Examples of forces that determine an organisation’s default future include:

Peoples’ mindsets: In a recent Formicio article my colleague Peter Turgoose defined a mindset as a set of assumptions, methods or systems held by one or more people or groups of people. Mindsets are usually so established that they create a powerful incentive to continue to adopt or accept prior behaviours, choices or tools. If an organisation has people with deeply-routed mindsets no amount of changes to process or structure will change its default future.

An example is in the UK public sector where an entitlement mindset has developed to such a degree that any suggestion of pension reform – that reflects the demographic and economic realities of today – is totally rejected.

Technology: New technologies can create many possibilities in terms of an improved future. Equally, older technologies can also act as a powerful force in determining the default future. We tend to call the latter legacy systems or the legacy IT estate. Legacy technology tends to consume ever-increasing resources to keep the organisation running and is very difficult to change or replace.

An example of where legacy technology has a major influence on an organisation’s default future is in retail banking where the functionality and architecture of current banking engines can severely constrain what is possible in terms of products and customer experience.

Regulation: Whether it is with respect to protecting the rights of customers, employees or the environment, we operate in an increasingly regulated world. While regulation can be a good thing – as it helps protect those who cannot protect themselves – it does restrict what organisations can and cannot do.

An example in the UK at the moment is the debate on business regulation in general and employment law in particular, where many politicians are increasingly realising that the existing employment legislation is impeding growth.

Macro-economic climate: We are currently going through one of the toughest economic periods in a generation. Many countries, particularly those in Europe, have borrowed excessively over recent years and have built up national debts that will take years, if ever, to clear. For example, in March 2012 the UK owed £1,022.5bn, a leap from £905bn a year earlier. This equates to 66% of GDP, up from 60% a year ago. This net debt figure does not include bank bailouts and other financial interventions. With these included, the figure at the end of 2011 was £2,305bn or 148.1% of GDP, down slightly from 150.7% a year earlier. The UK is not alone in carrying such unsustainable debt, and the crisis within the eurozone countries makes the coming months and years particularly challenging.

The implication of this economic climate is that the default future of many businesses whose primary market is Europe looks particularly bleak at the moment. This is unlikely to change in the near future as analysts predict that many European countries will continue to have low growth and that Europe will experience a ‘lost decade’ similar to that seen in Japan during the nineties.

Customers: The behaviour of customers is changing and will continue to change at an ever increasing pace. It’s not too long ago that the loyalty of customers could be assumed; children would bank at the same place as their parents and drive the same make of car. This is no longer the case; the younger generation – particularly Gen Y – has no sense of customer loyalty and will readily switch brands and suppliers to follow friends and what’s currently in fashion.

In an attempt to establish brand loyalty, companies are increasingly using social networking sites like Facebook, YouTube and Twitter to create a connection with their customers.

Past winning strategies: If Albert Einstein’s definition of insanity – doing the same thing over and over again and expecting different results – is true, then some organisations could be accused of insanity as they continue to pursue a strategy that was once successful, but no longer delivers results. A strategy that has delivered results over many years is very difficult to change: in many cases leaders find it impossible to see an alternative.

This is particularly the case when the business environment has slowly evolved over time and executives have failed to realise that the change of context has created a different default future to the one they had enjoyed in the past.

Complexity: In a recent Formicio article my colleague Peter Cochrane argued that our world and everything in it, including our workplace, government and everyday living, is essentially non-linear and complex, and for the human race it is becoming ever more so with each new layer of technology and the insights that it affords. Furthermore, the thinking and models of the past industrial revolution and experiences of past centuries cannot solve today’s problems as we try to engineer a future that supports a growing population.

The implication of this assertion is that predicting the default future of an enterprise is increasingly difficult and that organisations need to become more adaptive and agile. Equally the process of defining the default future needs to become a continuous process rather than an exercise completed once every couple of years.

Talent: The ultimate determining factor of an organisation’s default future is its people and the calibre of its leadership. The challenge for many organisations is recognising that its default future is embedded in the talent of its people. People have knowledge, skills and experience, and it’s the application of these capabilities that influences an organisation’s default future. Should this default future be unacceptable, it may be necessary to re-evaluate the talent required to create an improved future.

The classic example of this is in sport where the manager sees little possibility of winning trophies with his existing players and virtually replaces the entire squad with new players. An extreme example maybe, but we’ve all seen extensive changes made to the executive team when the Board acknowledges that the default future for the company is unacceptable.

The role leaders must play

If strategy is essentially about making choices (see Peter Boggis’ Formicio article Strategy – The World of Choices and their Implications) then the first choice leaders need to make is whether the default future of their organisation is acceptable. If not, they then need to make further choices that define an improved future. These choices need to be cognisant of the forces currently driving their organisation to its default future. They should focus on those that they can control and isolate themselves from those over which they have no influence.

Furthermore, realising an improved future involves more than defining one. Leaders need to ensure that the conditions for success are put in place and remain in place throughout the journey.

Leadership is about understanding your organisation’s default future and taking action to create an improved future; the remainder of what we do as executives is management.